Five Hedge Funds’ Picks that Show Strong Gains

#4 Office Depot Inc (NASDAQ:ODP)

 – Investors with Long Positions (as of December 31): 46

– Aggregate Value of Investors’ Holdings (as of December 31): $627.20 million

Amid a 12.15% drop in Office Depot Inc (NASDAQ:ODP)’s stock during the fourth quarter, the number of investors covered by us with long positions in the company inched down by one and the aggregate value of their positions declined by 35%. Notable investors that reduced their stakes in the company significantly during the fourth quarter included Jeffrey Smith‘s Starboard Value LP, which cut its stake by 90% to 4.48 million shares. A large part of decline that Office Depot Inc (NASDAQ:ODP) saw during the quarter came in December after the Federal Trade Commission rejected its merger with  Staples, Inc. (NASDAQ:SPLS). Interestingly, the gains that the company has seen this year have also come due to this merger. On March 18, both companies issued a joint letter to their shareholders in which they reaffirmed their commitment to the transaction. Furthermore, on March 28, the New York Post reported that Staples, Inc. (NASDAQ:SPLS) is on the verge of winning its case against the FTC, which will clear the way for its merger with Office Depot Inc. All this positive news propelled Office Depot Inc’s stock to soar during the last fortnight of the first quarter and end the quarter with gains of 25.88%.

#3 Macy’s, Inc. (NYSE:M)

 – Investors with Long Positions (as of December 31): 51

– Aggregate Value of Investors’ Holdings (as of December 31): $1.16 billion

Macy’s, Inc. (NYSE:M) saw a notable decline in popularity among hedge funds during the fourth quarter with its ownership among the funds we track dropping by 16, while the aggregate value of their stakes slid by $434 million. However, there were also a number of prominent funds which initiated a stake in Macy’s, Inc. (NYSE:M) during that period, including David Einhorn‘s Greenlight Capital, which bought 6.74 million shares. In the last couple of quarters several activist investors have taken an ownership in the company, citing its real estate assets, which they believe are undervalued. In a recent letter to investors, Greenlight wrote, “it wouldn’t surprise us if a private equity firm teamed up with a REIT to buy the company and unlock the value privately.” In its fourth-quarter report, Macy’s, Inc. (NYSE:M) showed signs that it is taking the advice of these investors, which was largely the reason why its stock soared despite the dismal results and it ended the first quarter with gains of 25.78%. On March 14, analysts at Jefferies Group initiated a coverage on the stock with a ‘Hold’ rating and $45 price target.